Boston Safe Deposit & Trust Co. v. Collier

• Decision Date: 07 January 1916
• Citation: 222 Mass. 390
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: BOSTON SAFE DEPOSIT & TRUST COMPANY v. FORREST F. COLLIER, trustee in bankruptcy, & another.

222 Mass. 390

BOSTON SAFE DEPOSIT & TRUST COMPANY v. FORREST F. COLLIER, trustee in bankruptcy, & another.

Supreme Judicial Court of Massachusetts, Suffolk.

January 7, 1916

November 16, 1915.

Present: RUGG, C.

J., BRALEY, DE COURCY, CROSBY, & CARROLL, JJ.

Restraint upon Alienation. Trust, Validity, Spendthrift.

In this Commonwealth a provision in a will, that "every payment of income or principal hereinbefore directed or devised to be made, shall be made personally to the persons to whom they are devised or upon their order or receipt in writing, in either case free from the interference or control of the creditors of such persons and never by way of anticipation or assignment," is not invalid as an improper restraint upon alienation.

Where, therefore by the terms of a trust under a will containing such a provision it also is provided that, after the death of the testator's son and when the youngest of such son's children reaches or would have reached, if living, the age of forty years, one half of the trust estate is to be divided among such children and the issue of a deceased child, and those events have happened, a distributive share should be paid to a son of the testator's son, although he had been adjudged a bankrupt before the time for distribution had arrived and a trustee in bankruptcy of his estate sought that the share should be paid to him. Review by BRALEY, J., of cases following Broadway National Bank v. Adams, 133 Mass. 170 .

BILL IN EQUITY filed in the Probate Court on November 25, 1914, by the trustee under the will of Maturin M. Ballou, late of Boston for instructions as to whether, under the ninth clause of the will, set out in the opinion, a distributive share of Franklin B. Ballou should be paid to him or to his trustee in bankruptcy, the defendant Forrest F. Collier.

In the Probate Court, where the suit was heard upon the pleadings and an agreed statement of facts, Grant, J., ordered a decree directing that the share be paid to Franklin B. Ballou. On appeal from that decree the case was reserved for this court by Braley,

J., upon the pleadings and the agreed statement of facts. The material facts are stated in the opinion.

F. F. Collier, trustee in bankruptcy, pro se. H. A. Wagner, for the defendant Ballou.

BRALEY, J. The testator, in the ninth clause of his will, provided, "It is my will that every payment of income or principal hereinbefore directed or devised to be made, shall be made personally to the persons to whom they are devised or upon their order or receipt in writing, in either case free from the interference or control of the creditors of such persons and never by way of anticipation or assignment."

By other clauses he left the residue of his estate in trust to pay to his widow and to his son Murray R. Ballou, in equal shares, the net income for life and upon the death of his son the income coming to him is to be divided equally among his surviving children or the issue then living of deceased children until the first child reached or would have reached, if living, the age of forty, but in any event not before twenty-one years after the son's death, when the principal is to be distributed in equal shares among the then surviving children and the issue then living of any deceased child.

The widow is still living, but Murray R. Ballou has died, leaving three children and the issue of a deceased child surviving, among whom full distribution has been made except as to Franklin B. Ballou, a son, who at the date of filing the petition was more than forty years of age.

But, as he had been adjudged a bankrupt before distribution, the defendant Collier, his trustee in bankruptcy, contends, that, although a discharge in bankruptcy had been granted he is entitled to the share coming to the bankrupt because a testator cannot nullify a bequest of an absolute legal interest in personal property by a provision that the legatee's interest shall not be alienated, nor taken for his debts.

It is urged that the restriction is repugnant to the gift or bequest, and the English rule undoubtedly is, "that, if the property was given to the sons, it must remain subject to the incidents of property, and it could not be preserved from the creditors unless given to some one else." Brandon v. Robinson, 18 Ves. 429, 434.

But in Lathrop v. Merrill, 207 Mass. 6 , 9, from which this proposition is taken, it is also said: "On the other hand it must be taken now to be settled in this Commonwealth that in case of the devise of an equitable fee in land or the bequest of an equitable interest in personal property the rule which originated in Broadway National Bank v. Adams, 133 Mass. 170 , obtains, and limitations against alienation and forbidding the property to be taken for the debts of the devisee or legatee are valid. Claflin v. Claflin, 149 Mass. 19 . Young v. Snow, 167 Mass. 287 . Danahy v. Noonan, 176 Mass. 467. Hoffman v. New England Trust Co. 187 Mass. 205 . Dunn v. Dobson, 198 Mass. 142 ."

It is nevertheless now pressed in argument that this court never has gone so far as to say that an equitable fee can be placed beyond the reach of creditors. The reasoning in Broadway National Bank v. Adams, 133 Mass. 170, 173, 174, is not thus limited.

Said Chief Justice Morton speaking for the court: "We do not see why the founder of a trust may not directly provide that his property shall go to his beneficiary with the restriction that it shall not be alienable by anticipation, and that his creditors shall not have the right to attach it in advance, instead of indirectly reaching the same result by a provision for a cesser or a limitation over, or by giving his trustees a discretion as to paying it. He has the entire jus disponendi, which imports that he may give it absolutely, or may impose any restrictions or fetters not repugnant to the nature of the estate which he gives. Under our system, creditors may reach all the property of the debtor not exempted by law, but they cannot enlarge the gift of the founder of a trust, and take more than he has given.

"It is argued that investing a man with apparent wealth tends to mislead creditors, and to induce them to give him credit. The answer is, that creditors have no right to rely upon property thus held, and to give him credit upon the basis of an estate which, by the instrument creating it, is declared to be inalienable by him, and not liable for his debts. By the exercise of proper diligence they can ascertain the nature and extent of his estate, especially in this Commonwealth, where all wills and most deeds are spread upon the public records. There is the same danger of their being misled by false appearances, and induced to give credit to the equitable life tenant when the will or deed of trust provides for a cesser or limitation over, in case of an attempted alienation, or of bankruptcy or attachment."

The trust in question is not within the rule against perpetuities or open to the objection of the accumulation of property by corporations or ecclesiastical bodies of which the common law was exceedingly jealous. And whether income or principal is placed beyond the power of alienation or of attachment, the result to creditors of the beneficiary is merely a question of degree.

The owner, of course, cannot settle his property in trust, putting his right to the income which is reserved to himself for life beyond the reach of creditors. If, however, the founder is not the debtor, the property held in trust is not the debtor's except in so far as the founder has provided. Pacific National Bank v. Windram, 133 Mass. 175 , 176.

We are manifestly dealing with a rule of property which there is every reason to believe has been accepted and acted upon by the bar settlors and testators for thirty-three years, since the leading case stating the law governing the creation of equitable estates was decided. It therefore becomes necessary to review our own cases subsequent to Broadway National Bank v. Adams in order to determine whether there has been any departure from the doctrine enunciated in that case, which has been referred to and followed in Pacific National Bank v. Windram, 133 Mass. 175 , Foster v. Foster, 133 Mass. 179 , Forbes...